Ichigo Office REIT Growth Strategy
September 7, 2015

Ichigo Office REIT Investment Corporation (8975)
Ichigo Real Estate Investment Advisors Co., Ltd.

© 2015 Ichigo Real Estate Investment Advisors Co., Ltd. Ichigo Office REIT Investment Corporation All rights reserved.

www.ichigo-office.co.jp/english

© 2015 Ichigo Real Estate Investment Advisors Co., Ltd. Ichigo Office REIT Investment Corporation All rights reserved.

Creating peace of mind throughhhonestt andd committed
itt d management.
t© 2015 Ichigo Real Estate Investment Advisors Co., Ltd. Ichigo Office REIT Investment Corporation All rights reserved.

© 2015 Ichigo Real Estate Investment Advisors Co., Ltd. Ichigo Office REIT Investment Corporation All rights reserved.

Strategic Transition: Ichigo Office REIT
 Transition from a multi
multi-asset
asset class REIT to a specialized office REIT
focusing on Mid-Size Offices, an asset class that offers both returnstability and upside potential
 Target assets: Offices
 Non-target assets: Residential, Retail, Hotels, etc.
non target assets (c. 15% of current
 No forcible requirement to exit non-target
portfolio, will decrease over time) Corporate name change to Ichigo Office REIT Investment Corporation
 New growth strategy and action plan as a specialized office REIT

© 2015 Ichigo Real Estate Investment Advisors Co., Ltd. Ichigo Office REIT Investment Corporation All rights reserved.

5

Portfolio: 85% Office & 83% Tokyo Metro Area
A off A
As
Augustt 31
31, 2015
By UsePortfolio Overview
No of Assets
No.

Other
15%Acquisition Price (bn yen)and % of portfolio

76

Total Acquisition Price 163,928 mm yen

SapporoOffice85%

0.6
1%

Total Appraisal Value 168,409 mm yen
Leasable Area

223,735 m2

Occupancy

96.1%By PriceTokyoMetroArea135.383%

Kansai
3.22%<JPY1B
8%

Sendai
1.81%>JPY3B49%

JPY1B～2B
29%

JPY2B～3B
14%

Nagoya12.37%

By AgeOther
10.16%

Fukuoka>30
22%0～1022%20～30years
43%

10～20
years
13%

0.6
1%

(Note) Leasable area and occupancy are as of July 31, 2015.
The figures in the graphs are based on acquisition price.
© 2015 Ichigo Real Estate Investment Advisors Co., Ltd. Ichigo Office REIT Investment Corporation All rights reserved.

Average:21.8 years
6Significant Portfolio Growth: Focus on Mid-Size Offices
As of October 31, 2014

As of April 30, 2015

As of August 31, 2015

Total

706576Office

41

48

60

Residence18－－

Other111716Total

114.0(100%)

123.3(100%)

163.9(100%)

Office75.1(66%)

95.8(78%)139.9(85%)

Residence

20.0(18%)

－－

Other

18.8(16%)27.4(22%)24.0(15%)

Central Tojkyo
j y

54%

49%

60%

Tokyo Metropolitan Area

21%

26%

22%

Four Major Regional Cities

17%

15%

9%

Other Regional Cities

8%

9%

8%

114.1

126.3

168.4

170,306.22㎡

184,919.13㎡

223,735.20㎡

Occupancy

95.7%

96.0%

96.1%

NOI Yield

5.6%

5.6%

5.5%

LTV (Based on Book Value)

45.2%

43.7%

43.8%

# of Assets

Acquisition Price(billion yen)

Location

Appraisal Value (billion yen)
Leasable Area

1: NOI as of April 30, 2015 and August 31, 2015 are provisionally calculated excluding assets sold during the period. NOI of assets acquired in April 2015 and October 2015 arecalculated from the annual NOI calculated via DCF method based on the appraisal value at acquisition.
2: Appraisal Value as of August 31, 2015 is provisionally calculated based on portfolio assets as of April 30, 2015 plus the October 2015 acquisitions.
3: Leasable Area and Occupancy indicated in As of August 31, 2015 are as of July 31, 2015.
4: LTV as of August 31, 2015 is provisionally calculated based on interest bearing liabilities as of April 30, 2015, taking the assets acquired and sold during the October 2015 fiscal
period into account.
5: “Other” as of April 30, 2015 and August 31, 2015 includes 3 serviced apartments.

© 2015 Ichigo Real Estate Investment Advisors Co., Ltd. Ichigo Office REIT Investment Corporation All rights reserved.

7

10 Consecutive Periods of Dividend Growth – No. 1 vs. All J-REITs1

118% Dividend Growth(April 2010 – April 2015)

737
yen2

April 2010

899
yen2

October 2010

979
yen2

April 2011

1,031
1031
yen2

October 2011

1,219
yen

April 2012

2nd Accretive
Follow-On
Public Offering(Nov 2013)

1st Accretive
Follow-On
Public Offering(May 2013)

1,387
yen

October 2012

3rd Accretive
Follow-On
Public Offering(Nov 2014)
4th Accretive
Follow-On
Public Offering((Apr 2015))

1,494
yen

1,537
yen

1,541
yen

1,547
yen

April 2013

October 2013

April 2014

October 2014

1,603
1603yenApril 2015

1,670 yen(Expected)

October 2015

1 10 consecutive
i periods
i d are through
hhAAprilil 30
30, 2015 periodi d2 Adjusted to reflect stock split on November 1, 2011
3 Average of J-REITs disclosing dividends for the last 10 terms© 2015 Ichigo Real Estate Investment Advisors Co., Ltd. Ichigo Office REIT Investment Corporation All rights reserved.

8Recent Acquisitions Contributing to Further Dividend Growth Acquired interest (JPY 2B) in 13 high-quality mid-size office assets withpreferential negotiation rights to fully acquire all 13 assets
 Dividend contribution: JPY 100M pp.a.
aEPS
c. +35 yen Contracted to acquire Kawasaki office asset(JPY1 75B) at Sep(JPY1.75B)
Sep-endend 2015
 8-minute walk from JR Kawasaki Station
 NOI 114 million p.a., NOI yield 6.5%

© 2015 Ichigo Real Estate Investment Advisors Co., Ltd. Ichigo Office REIT Investment Corporation All rights reserved.

9

Growth Achievements and Mid-Term Targets
Stage ⅠFoundation for Growth
Meger
Nov 1, 2011

Dividend PerShare(yen)April 2012

Stage ⅡAccretive Growth Cycle

October 2012

1,387

April 2013

1,494

Stage Ⅲ
Enhance Profitability

October 2013

April 2014

1,537

1,541

October 2014

1,547

Stage Ⅳ
Increase Size & Scale
April 2015

1,603

October 2015(as of August 31, 2015)

Stage Ⅴ

Stage Ⅵ

April/October
2016

April/October
2017

Mid-Term
Targets

1,670

2,000 yen

1,219
954

76
163.9B

Portfolio(No ofassets/billion yen)71
107.9B

Office74.3B

67104.8B

Office71.1B

67106.1B

Office72.4B

66
104.3B

Office70.6B

Comprehensive
Refinancing

68
112.3B71
114.3B70
114.0B65
123.3B

オフィス
JPY230B
1,399 億円

Office77.5B

Office75 5B
75.5B

Accretive PO

Accretive POOffice
75 1B
75.1B

Office95.8B

Office139.9B

Accretive PO

Accretive PO

Strategic
Restructuring

Significant
Portfolio GrowthCredit
R tiRating:A (Stable)

Key Events
Transition toOffice REIT
JCR Credit RatingA-© 2015 Ichigo Real Estate Investment Advisors Co., Ltd. Ichigo Office REIT Investment Corporation All rights reserved.

Seek NonCollateralization

10

Ichigo Office REIT Growth Strategy Roadmap
StageⅠ/Ⅱ/Ⅲ/Ⅳ

Stage V

Multi‐Asset REIT

Stage VI

Specialized Office REIT

2011/10

2015/10

2016/42017/4

2016/102017/10Grow Office Portfolio
Goals
Targetts

Dividend per Share

Lay Foundation for Sustainable
Dividend GrowthEnhannce Profitabilityy

Accretivve Growth Cyccle

Foundaation for Growtth

Strengthenn Forward Gro
owth Capabilities

JPY 164B (August 31, 2015)

Credit Rating

A- (Stable)■ Organic Growth Strategy■ Organic Growth Strategy

Achieve continuous NOI growth and strengthen
Ichigo Office brandy in Central Tokyoy where・ Raise rents, especially
supply-demand balance is tight・ Increase rental-related income
・ Support branding and sense of Ichigo quality atassets, e.g., prominent Ichigo signage
・ Maintain highest standard of quality in servicing
tenants via Ichigo Property Management Standard

Drive growth with strong Ichigo Office brandestablished at 100 asset portfolio
g assets via strong
g Ichigog・Increase status of Ichigo
Office brand・Develop original services for Ichigo tenants
・Drive higher rents within and outside of Tokyo・Maximum return on controlled CAPEX

Target: Increase rents by >2.0% p.a.

■ External Growth Strategy
Increase portfolio size and scale and be smart in
portfolio restructuring
Cid acquiring
i i 13 assets
t wherehhhave・ Consider
preferential acquisition rights・ Sell assets with limited potential■ Financing Strategy
Improve credit rating & borrowing terms
・Improve credit rating from A- (Stable)
Improve borrowing terms (cost/tenor/diversity)
・Improve・Acquire bank commitment line
・Deploy negative goodwill to increase dividends
・Prepare to enter global REIT indices

Mid-Term Targets

2,000 yen
JPY 230B
A (Stable)

1,670 yen (Forecast)

Total Assets

Action Plan

Stable Dividend Growth■ External Growth Strategy
Aim for asset size of JPY230B
・Enhance acquisition pipeline via diversified
sourcing route・Use Ichigo sponsor support and diverse funding
capability to close quickly under deadline■ Financing Strategy
Improve credit rating and diversify funding
A hian A (St(Stable)bl ) credit
dit ratingti・Achieve
・ Consider issuance of REIT bonds and broadeningof lender base・ Use financial strength and commitment line togrow acquisition capacity
・Further improve borrowing terms
・Enter global REIT indices© 2015 Ichigo Real Estate Investment Advisors Co., Ltd. Ichigo Office REIT Investment Corporation All rights reserved.

11Organic Growth Strategy (1)Target: Increase rents by >2.0%/year Renew at higher rents, supported by Ichigo’s direct tenant relationships－FocusFon tenants
tt ini central
t lTTokyo
k iin areas withith significant
i ifi
td
demand:d Shib
Shibuya, Ebi
Ebisu,
Gotanda, Kanda－Market the superior functionality of Ichigo assets in Japanese regional areas to drive
higher rents

 Acquire new tenants at higher rents－Higher rents via value-add enhancements to improve functionality and tailoredmarketing to target tenants
Lease Contract Negotiations

Renewals
NewHigher rents
Market rents＋α

Unchanged

 Increase total income via non-rental income increases－ Review utilities and parking fees
© 2015 Ichigo Real Estate Investment Advisors Co., Ltd. Ichigo Office REIT Investment Corporation All rights reserved.

12Organic Growth Strategy (2) Ichigo Branding Strengthen Ichigo brand via Ichigo-ification of building names and Ichigo signage
g Entrance Brandingg Projectj
 Ichigo- Create Ichigo-unique entrances that embody the Ichigo Office brand Build an unmatched, well-branded 100-asset portfolio
 Build a recognizedgand high-qualityg q
y brand so that Ichigo
g Office Buildings
g arerecognized as high value for tenants

Total 76 assets (Sept. 7, 2015)
Target: 100 Assets© 2015 Ichigo Real Estate Investment Advisors Co., Ltd. Ichigo Office REIT Investment Corporation All rights reserved.

13

External Growth Strategy
 Growth Strategy Roadmap
 Consider acquiring 13 assets where have preferential acquisition rights
Total: JPY 29.2B Preferential acquisition right period: July 30, 2015 – July 31, 2016
 Continue to improve portfolio quality (sell assets with limited potential)
 Enhance acquisition pipeline via diversified sourcing
 Use Ichigo sponsor support and diverse funding capability to close quickly on high-quality assets
with tight acquisition deadlines
 Drive higher EPS via acquisition of mid-size office assets in growing economic zones
 Improve profitability of acquired assets and increase shareholder value Take Full Advantage of Ichigo as Sponsor
 Make maximum use of Ichigo Group’s deep value-add capabilities to drive further growth
Ichigo Group Mid-Size Office Buildings*

Value-Add Business Model

OtherPrivate Funds

Hotelss

Hotel REIT(new)Offices

Office REIT (8975)

Real Estate

Acquisition
SaleIchigo
Value Add

Increase Asset Value

Real EstateAcquisition
SaleWIN Gotanda
IKB Hongo Building
MIF Building
Kichijoji Central Building
Building(Bunkyo-ku, Tokyo) (Chiyoda-ku, Tokyo)(Musashino City, Tokyo)(Shinagawa-ku, Tokyo)*These buildings
g are merely
y shown as examples,p , and Ichigo
g Office REIT has
no specific plans to acquire these assets as of today.

14© 2015 Ichigo Real Estate Investment Advisors Co., Ltd. Ichigo Office REIT Investment Corporation All rights reserved.

Financing Strategy
 Achieved increased financial strength via refinancing and new loans frommegabank centered lender base, leading to new A- long-term issuer ratingg towards non-collateralization and further increase in credit ratingg to Working
increase acquisition capacity and drive higher earnings
Megabank-CenteredMb kC tdLender Base
Current

A （Stable）
A-（Stable）
Acquired Credit Rating

Going
ForwardJune 30, 2015
Japan Credit Rating Agency (JCR)

Non-Collateralization
・Lower debt cost・Higher credit rating

Diversify Funding to Support Further Asset Acquisition(e.g., REIT Bonds, Commitment Lines)© 2015 Ichigo Real Estate Investment Advisors Co., Ltd. Ichigo Office REIT Investment Corporation All rights reserved.

15

Reference: Dividend Reserve & Negative Goodwill Amortization
Partial Amendments to Ordinance on Accounting of Investment
Corporations and Code on Real Estate Investment Trusts and Real EstateInvestment Corporations
pin 2015 Tax Law Revision Need to change Dividend Reserve to Reserve for Adjustment of Temporary
Differences by the end of March 2017 and amortize negative goodwill to zero within 50years

 Ichigo Office REIT Negative Goodwill Amortization Policy Determine the amortization amount and start date with reference to cash position andavoidance of excessive dividend volatilityy Seek further dividend growth taking into consideration the impact of forward expenses
such as forecast property and city planning tax in October 2016 period
 Continue to offset one-off expenses with reserves

 Details

Dividend Reserve Policy
Asset Sales Offset sales and acquisitions-related P&Land(Profits set aside in dividend reserve and used forAcquisitions dividend stabilization)

 JPY 11.7B negative goodwill as of Sept 7, 2015
 Start amortization in October 2016 periodFinancing
Tax & Amortize minimum JPY 200MM per period

Accounting
OtherTax Law
Revision(NEW)

Offset one time expenses
Offset tax vs. accounting discrepancies
Offset other one-off P&L
Amortize negative goodwill of minimum JPY 200MM
p.a. (beginning October 2016 period)© 2015 Ichigo Real Estate Investment Advisors Co., Ltd. Ichigo Office REIT Investment Corporation All rights reserved.

16

MEMO

© 2015 Ichigo Real Estate Investment Advisors Co., Ltd. Ichigo Office REIT Investment Corporation All rights reserved.

17

MEMO

© 2015 Ichigo Real Estate Investment Advisors Co., Ltd. Ichigo Office REIT Investment Corporation All rights reserved.

18

Disclaimer
These materials
Tht i l are ffor iinformational
ftil purposes only,
l anddd
do nott constitutetit t or fform a partt of,f andd should
h ld nott b
be construed
t d as, anoffer to sell or a solicitation of an offer to buy any securities of Ichigo Office REIT. You should consult with a representative of asecurities firm if you intend to invest in any securities of Ichigo Office REIT.
These materials may contain forward-looking statements regarding the intent, belief or current expectations of management ofIchigo
g Office REIT with respect
pto financial condition and future results of operations.
pThese statements are based on certain
assumptions founded on currently available information. Accordingly, such statements are subjects to risks, uncertainties, andassumptions, and there is no assurance as to actual financial conditions or results of operations. Actual results may vary fromthose indicated in the forward-looking statements. Accordingly, please refrain from solely relying on these statements.
These materials have been created by the management of Ichigo Office REIT and Ichigo Real Estate Investment Advisors Co.,
Ltd. (IRE) with the belief that the information contained is accurate
Ltdaccurate. However
However, there is no assurance given as to the accuracy
accuracy,certainty, validity or fairness of any such information.
This document is a translation. If there is any discrepancy between the Japanese version and the English translation, theJapanese version shall prevail.
Please note that the content of these materials is subject to revision or retraction without prior notice.
No copying or reproduction of these materials or part of these materials is allowed without obtaining prior consent from Ichigo
Office REIT and IRE.

Contact:Ichigo Office REIT IR Desk
TEL：03-3502-4891 FAX：03-3502-4894
IR_Office@ichigo.gr.jp
www.ichigo-office.co.jp/english
Ichigo is Japan’s first zero-carbon listed real estate company. We are taking
responsibility for our environmental footprint by offsetting our carbon emissions
and investing in low
low-carbon
carbon technologies such as solar energy
energy.

© 2015 Ichigo Real Estate Investment Advisors Co., Ltd. Ichigo Office REIT Investment Corporation All rights reserved.

19